Check whether a franchise transfer is a sale needing disclosure
Key facts
- Human involvement
- YellowClose supervision
- How AI is used
- Extract who is selling, what the franchisor did with the prospective transferee, and whether the file contains anything beyond an approval or disapproval of the transfer. Do not calculate a cooling-off date.
- What the lawyer must review
- 16 CFR 436.1(t) says a sale of a franchise does not include the transfer of a franchise by an existing franchisee where the franchisor has had no significant involvement with the prospective transferee. A franchisor's approval or disapproval of a transfer alone is not significant involvement. Where there is no sale, the pre-sale disclosure timing in 16 CFR 436.2 is not triggered by that definition. The lawyer decides whether the franchisor's role was significant involvement. The opened FTC text does not add a federal cooling-off period for a transfer. ABA Model Rules 1.1 and 5.3 and Formal Opinion 512 leave that decision with the lawyer.
- Written for / version
- United States versionUS
Who does what
| Role | What they do |
|---|---|
| Assistance | Potential support includes extracting and organising information and assembling provisional schedules. Confirm the tool’s capability and permitted scope. |
| Lawyer | Set the scope, supervise the work closely, verify every part relied on, resolve omissions and exceptions, and approve the exact output. |
Checklist
- Confirm the output against the client’s instructions and the complete relevant source material, including omissions or contradictions.
- Resolve exceptions and record the responsible lawyer’s approval of the exact output and intended use.
Related tasks
Draft or review a franchise disclosure document against the prescribed headingsCheck the franchisor's disclosure and any registration the jurisdiction requiresDraft or review a franchise agreement from the disclosure and the term sheetBuild a franchisee due-diligence issues list from the disclosure pack